Paris Auto Show opens amid worries

Visitors look at cars displayed on the stand of Audi, the top-of-the-range carmaker owned by German auto giant Volkswagen, during the opening day of the Paris Motor Show on September 29, 2012.

PHOTO: Thomas Samson, AFP/Getty Images

By Lori Hinnant, The Associated Press

Originally published: September 27, 2012

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PARIS – Carmakers prepared for a future of lower sales in Europe, labour strife and uncertainty as they set out the latest models at the Paris Auto Show on Thursday.

France’s carmakers will be aiming for the mass market with their launches at the auto show, which had its media preview Thursday. The show opens to the public this weekend.

France’s Peugeot, Citroen and Renault see the event as a chance to show off their latest models to a hometown crowd.

France produced 2.2 million cars last year, compared to 3.5 million in 2005. The industry employs 30 per cent fewer people in France than it did 10 years ago, and more job cuts are imminent.

European data show new passenger car registrations dropped 8.9 per cent in August, the 11th consecutive monthly decline. And the industry is well over capacity, selling far fewer cars than factories already running on reduce capacity can produce.

Rebecca Lindland, director of research for IHS Automotive, said the current downturn is no blip. Car manufacturers are facing a long-term reduction in demand in Europe.

Even as far out as 2020, the forecast "really never gets above 15.5 million units," down from 17.5 million in 2007. Plant closures, which many carmakers have been calling for, are "incredibly difficult politically but (are) incredibly necessary."

"If you can’t change demand, you have to change supply," she said.

Only three plants have shut down in Europe since the debt crisis took hold in 2010, according to auto industry consultants Alix Partners in a June report. Peugeot has proposed closing one factory in France this year, but the plan has run into opposition from France’s powerful unions and the government.

PSA Peugeot Citroen chief executive Philippe Varin insisted Thursday that the only solution is to close plants, no matter how politically difficult.

"This situation is not tenable over the long term," he said.

Sergio Marchionne, CEO of Fiat and Chrysler, has long advocated that the European Union co-ordinate such decisions and help carmakers restructure — since individual countries tend to fight just to save plants on their home turf.

"I think it would be much more beneficial if this became a European problem as opposed to a national problem," he said. "There’s no flag that will fix this."

All the gleam was on the cars Thursday, as executives made no effort to hide how bad the auto industry is faring. Varin said that the situation is only getting worse, with Germany’s economy, the traditional powerhouse of Europe, now slowing down.

"Our working hypothesis is that the market is at a plateau for the next three years and that 2015 won’t look very different from 2012," he said.

The industry will have to redefine itself in coming years, both because new markets like China and Brazil are vitally important and because the economic troubles of the past several years have taken a toll.

"You really feel that the automobile industry is still unclear where we are going out from this very difficult time," said Sven Beiker, executive director of Stanford University’s Center for Automomtive Research.